Leigh Day

Fixed recoverable costs on the horizon for clinical negligence

Question

Are fixed recoverable costs going to be introduced for clinical negligence litigation?

Answer

On 1 May 2017 the Department of Health closed its consultation on fixed recoverable costs (FRCs) for clinical negligence (CN) claims. The consultation requested comments on a proposal to introduce a regime of FRCs for CN claims where the value of damages awarded is between £1,000 and £25,000.

Background

The Department of Health initially put forward the idea of FRCs for CN claims in August 2015. At this point, the regime was planned to apply to all claims worth up to £100,000, with a consultation to decide whether it could be extended to claims worth up to £250,000. The scheme was to be implemented by 1 October 2016.

The reaction to the proposals was significant. The limit on similar FRCs in other areas of litigation up to that point was £25,000 and so the broadening of such a regime to cover claims worth 10 times that amount represented a major change of policy. The scheme was opposed by a substantial number of bodies across the legal profession. While such responses were expected from specialist organisations such as the Association of Personal Injury Lawyers (APIL) and Action against Medical Accidents, they were also provided by more general bodies including the Bar Council and the Law Society.

In October 2016, the Department of Health had a change of heart. It announced that a consultation would be carried out for a FRC regime for CN claims, but only for those with a value of up to £25,000. This position was confirmed when the consultation officially opened in January 2017.

It is important to note that CN claims worth over £25,000 will still fall within the remit of Lord Justice Jackson’s review into FRCs across civil litigation as a whole. This is due to complete on 31 July 2017. Previously Jackson appeared to support the inclusion of CN claims up to £250,000 within a FRC regime. However, during a speech at the APIL conference in May 2017 he acknowledged that there were “considerable difficulties” in applying FRCs to CN multi-track claims valued at more than £25,000.

What the consultation says

The consultation opened on 31 January 2017 and closed on 1 May 2017. The proposals will apply to CN claims across England and Wales. It is suggested that claims worth up to £25,000 account for around 60% of all claims against the NHS (although the regime will also apply to claims against private and not-for-profit healthcare providers as well). The FRC regime will be implemented by changes to the Civil Procedures Rules.

The consultation requests comments on four possible options for a FRC fee structure as follows:

  1. a flat fee paid at certain stages across the litigation process, regardless of the value of claim;
  2. a flat fee as in option one, plus a percentage of the damages;
  3. a flat fee as in option one, but with small reduction if there is an early admission of liability; or
  4. a cost analysis approach.

The application of the FRC regime will be decided by the value of damages actually obtained (and therefore should the case settle for more than initially estimated, it should fall out of the FRC regime).

There is no separate provision suggested for counsel’s fees, although there is a fixed advocacy fee set by the value of the damages award. Expert fees are capped at a total of £1,200 for each party, regardless of discipline. The proposals also encourage the use of single joint experts. 

For those who wish to look at the finer detail of the consultation, the documents are available here.

Rationale behind the proposed FRC regime

In general, FRCs can provide some certainty to all parties to the litigation and can avoid expensive, lengthy disputes over costs. There are currently FRC schemes in place in other areas of personal injury law including road traffic accidents, employer liability and public liability up to a value of £25,000.

The Department of Health wishes to use the FRC regime to improve the efficiency and cost-effectiveness of CN claims. It wants the recoverable legal costs to be more proportionate to the overall value of the claim. The greatest disproportionality between costs recovered and damages obtained are for claims at the lower end of damages awarded, hence the focus on claims of up to £25,000. The Department of Health states that money saved from litigation costs will be redirected to front-line NHS services.

The Department of Health also hopes that FRCs will streamline the litigation process, helping to promote settlement and thus resolving the claim quicker for the patient and/or their family. Further, it has been suggested that early resolution will prevent any delay in identifying lessons to be learned from such adverse incidents and will directly contribute to improving patient safety.

Concerns around FRCs in CN claims

A key concern is that the proposed FRC regime has a narrow cost-based approach. The complexity of a CN claim – and therefore the work required to analyse and prove such a claim – does not directly correlate with the value of damages. Five minutes of negligent care can be the difference between a neonatal death claim and a claim on behalf of a child suffering from cerebral palsy with severe and lifelong neurological injuries. The investigation of liability would be the same for either outcome from such a scenario, but the damages obtained would differ from under £25,000 in a fatal claim, up to £8 - £10 million for the lifetime value of cerebral palsy. It is unlikely that it would be financially viable for the neonatal death claim to be pursued if only FRCs could be recovered, despite it representing the worst possible outcome.

Furthermore, the same injury could be suffered by two different claimants, but one claim may fall within the FRC regime and the other may not. The reason for this could be as simple their different occupations and therefore the size of any loss-of-earnings claim. The work done for each claim would be identical, but this would be not reflected in the costs recovered.

Claims on behalf of more vulnerable claimants such as the elderly or those with a prior disability are more likely to fall within the FRC regime. Due to prior care needs and/or being unable to work, such claimants often receive lower damages awards despite suffering severe life-changing injuries. These claims can be more complex than others due to the need to identify exactly what harm stems from the negligence and what is simply part of their other co-morbidities. The current proposed FRC regime would not provide the means to carry out this detailed quantum assessment.

Further, the aim of CN claims is not simply financial. Such claims provide a vital check and balance for healthcare providers, holding them to account, and can actively result in improvements to patient safety and care standards. A simple ratio of proportionality comparing damages to costs does not take into account the wider benefits of such cases being brought and the lessons that are learned as a result. Claims arising out of the Mid-Staffordshire scandal which led to the Francis Inquiry would have fallen within the proposed FRC scheme. If these claims were unable to be brought due to an inherently unprofitable FRC regime, very serious institutional failings could remain uncovered.

It should be noted that claims outside the FRC regime will still be subject to detailed assessment and the rules of reasonableness and proportionality.

Not all the responses are available online, but it seems from those that are that a FRC scheme is supported in principle for claims at the lower end of the damages award spectrum, but that it is essential that only appropriate cases remain within its boundaries. Key exit points have been suggested such as a denial of liability (in line with road traffic accident, employers’ liability and public liability protocols); if the likely damages value becomes higher than £25,000; or due to the number of expert witnesses required. Issues have also been raised about the level of costs suggested within the proposals, both in the fee structure and for expert witnesses.

Outcome

There is currently no date for the results of the consultation to be published, but it seems that a move towards FRCs is inevitable. It is hoped that this consultation will ensure that concerns are taken on board, but it is likely that there will be big changes ahead for the clinical negligence litigation market.  

Julie Struthers is a trainee solicitor at Leigh Day

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